22.3.2011. Η ανερχόμενη ΚίναHow China should rule the world
By Martin Wolf
Published: March 22 2011 21:54 | Last updated: March 22 2011 21:54
“Reform and opening up” has been China’s mantra for more than three decades. The result has been not only the emergence of a new economic superpower but of one highly integrated into the world economy. A big question, then, is how China should use its influence. It is one I addressed in a speech at this year’s China Development Forum in Beijing. My argument was that China has achieved greatness and now has responsibility for the global system thrust upon it.
This colossus is now the world’s largest exporter and second largest importer (after the US), unless the European Union is treated as a single unit. It has the world’s largest trade and current account surpluses and owns a third of world currency reserves. Its flow of savings is the world’s biggest. It is the largest importer of many commodities and the price-setter for many products. China’s influence is, in short, both pervasive and growing. Yet it is also a developing country ruled by the Communist party. This is an unprecedented combination.

China needs to develop its own view of how to use its influence. In doing so, it will have to start from a definition of its national interests and objectives. China’s overwhelming interest lies, I suggest, in a stable, peaceful and co-operative global political and economic environment. Only in such a world can China hope to sustain rapid development.
How should China achieve its aim? Broadly, it would be best achieved via further development of the rules-governed, institutionally based global system. The obvious alternative would be a hierarchical arrangement, with China at the apex. But such an approach would, I fear, lead to unmanageable conflicts with the other great powers. With this idea in mind, let us consider trade, payments, finance and resources.
As the world’s rising trading power, China is the natural successor of the US as guardian of the open trading system. It is important, for this reason, that China abide by all the rules and principles of the system and play an important part in developing it further. China should play a role in bringing the interminable Doha round to some sort of conclusion. It has a rising interest in protecting its own intellectual property and, for this reason, a matching interest in ensuring its own adherence to these rules. China also has a strong interest in protecting its growing direct investments abroad. For this reason, it should promote rules on protection of foreign direct investment. Finally, as a global trader, China has a strong interest in ensuring that the regional trade arrangements it creates, or joins, are compatible with the global rules.
As for payments, the immediate issue concerns the challenges created for China and its partners by its huge trade and current account surpluses. Happily, China itself recognises that the outcome has proved domestically destabilising. Chen Demin, China’s minister of commerce, has recently stated that the objective now is to “stabilise exports, expand imports and reduce the surplus”. Furthermore, he has added: “It is expected that imports will grow faster than exports this year. The share of the trade surplus in GDP may be below 3.1 per cent, lower than in 2010.” Indeed, China’s trade surpluses, though still huge, are roughly a half of what they were before the crisis (see chart).

China surely recognises that the accumulation of huge official claims on “safe” foreign liabilities must be matched by a corresponding supply. Unfortunately, the demand is now met via destabilising fiscal and external deficits in the US. China could help itself by accelerating liberalisation of capital outflows and increasing exchange rate flexibility.
Furthermore, China needs to develop a strategy for reform of the global monetary system that fits with its interests in managing the interface between its domestic development and global stability. One desirable move would be towards co-ordination of exchange rate management with other export-oriented emerging economies. It is also in China’s interests to secure a pragmatic accommodation with its partners in the discussions within the Group of 20 leading economies. This should focus on indicators of disequilibrium, methods of adjustment and liquidity provision for countries in difficulties.
As for finance, China’s objectives must be: first, to create a domestic system capable of supporting its own economic development; second, to help promote a global system that supports a tolerably stable world economy; and, third, to protect the former from the excesses of the latter. In achieving this difficult reconciliation China’s policies should be guided by the understanding that, in the long run, its financial system will be the hub of global finance. Yet the transition to full integration will be not only lengthy but also complex and fraught, with full integration of banking particularly dangerous.
Finally, let us look at access to resources. For the first time in its long history, China is dependent on access to imports of industrial raw materials. It is already the world’s largest importer of most raw materials. For China, policy in this area is of potentially the highest importance. Its immediate interest is to gain access to the world’s resources on favourable terms. It has decided, quite reasonably, to use its cheap capital and labour to secure this end. That is not only in China’s own interests but in those of other consumers. Since resources have global prices, any increase in supply is to the benefit of all consumers.
Nevertheless, it would be helpful if a consensus could be reached on the terms of investment and trade in natural resources. One aim should be to ensure that commodity-exporting countries – particularly poor ones, with limited capacity for governance – benefit from foreign investment and exports of natural resources. China will be a central player in securing such agreements. Above all, the world needs to agree that the underlying principle must remain those of free trade in open world markets. Prices need to be set in global competition, with, of course, the possibility of long-term contracts.
As China grows, its impact on the world expands exponentially. It must reconcile the imperatives of its rapid development with the need to take full account of its impact on the world. It will have to develop its own agenda, one that secures its linked objectives ofhttp://www.ft.com/cms/s/0/9ba6d850-54c2-11e0-b1ed-00144feab49a.html#ixzz1HYeFdgu6

Thank you for inviting me to your class for the second time. I am more than happy to be with you, and I know you too are happy to have me here, because after this lecture you will enjoy a long holiday. So Merry Christmas and Happy New Year!
I would like to share a few thoughts on China, and hope these will help you grasp the big picture, understand its behavior and motivation and judge its regional and international role. I presuppose a few questions you might ask, and try to answer them one by one.
Above all, is it necessary to go back to history to find clues for contemporary Chinese study? True that in a globalizing world, ideas across national borders are getting interconnected and harmonized. With 100 million Chinese people learning English, 130 thousand Chinese students studying in the United States and 200 thousand learning in the European Union, younger generation inside and outside the country think increasingly alike. Yet it remains important for China and the rest of the world to better understand one another, as the common interests rapidly expanding and exchanges deepening. In addition to technological innovation, confluence and clashes of ideas are contributing extensively to the shaping of the current history, playing a major role in today’s world.
To begin with, what are the values a Chinese person cherishes most? What are the unique mental sources that have impacts on the Chinese thinking, when it comes to foreign policy? According to the teaching of Confucius, a contemporary of Socrates in ancient China, a typical Chinese intellectual views himself as a person of constant learning and improvement, a filial member of the family, a responsible member of the society, with a mission to promote good governance of the country and wellbeing of the world, by practicing the doctrines of Ren(仁), Yi(义), Zhong(忠), Xin(信)and He(和). First, the value of the individual lies in Xue(学), that is to say, learning, obtaining truth and virtues and keeping to the right cause. How important is learning? From ancient times, life starts at entering a school and gaining wisdom and virtue. So starts the first passage of the Analects of Confucius: «Is it not a pleasure to review what one has learnt?» The philosopher went on to say, «a gentleman should seek neither a full stomach nor a decent home, but shall learn from the wise and virtuous to establish in him a good person.» How valuable are truth and virtue? The philosopher says: «It’s worth dying at dusk if one can learn of supreme truth on the morning»; «A man of virtue shall not be lonely, for there must be like-minded others»; «Isn’t he a true gentleman who is not upset at being unknown to others?»
If one’s learning is to obtain truth and gain virtues, what are the noblest characters for his undertaking to personal perfection and public good? In short, Ren(仁), care and benevolence,and Yi(义), justness and righteousness, are among these values. «To practice Ren is to love and care for people, exhausting one’s efforts in pursuing it while being understanding and forgiving towards others.» To live by such a doctrine is demanding, as Confucius once urged his students: «A learned person must be resolute and steadfast, for his task is heavy and his journey long. To practice the virtue of benevolence in the world is his burden, and isn’t that heavy? Only upon death does his journey come to an end, and isn’t that long?» And Mencius took benevolence and righteousness as the only way to success: «His heart dwelling in Ren and his deeds conforming to Yi, can a gentleman accomplish his great cause.» When Yi is in danger, Mencius makes such a choice: «Life is what I cherish, so is Yi. If I cannot have both, let me have righteousness instead of my life.»
To apply these principles to China’s foreign relations, the reform and opening up in China since 1978 is one of the largest learning projects in the world, by introducing foreign capital, new technology, modern management, and improving democracy and rule of law. One senior official at the Chinese Foreign Ministry once concluded that our participation in the regional cooperation frameworks has been a successful learning process. The guiding principles of the Chinese diplomacy also show the influence these Confucian doctrines. In international arena, China has been firm upholding its values for equality and mutual benefit, mutual trust and common security, multilateralism and fair international order. With the belief that «a just cause enjoys most support, and an unjust cause will lose support», China never wavered in promoting world peace and development, nor in safeguarding its sovereignty and territorial integrity.Second, Xiao(孝)and Ti(悌), or filialness, friendliness, fraternity are among the most desirable virtues in a traditional Chinese society, and they remain important lines to follow up to now. In a typical Chinese community, a man sees himself as someone’s son, brother, father, friend or colleague. He is required to treat others in similar manners as he treats his family members, with respect for the elder, caring for the younger, and loyalty to his obligations. A student of Confucius’ once complained about having no brothers. His schoolmate Zixia(子夏) said to him: «A gentleman has to act earnestly, do no evil and respect others according to propriety, thus all men under Heaven are his brothers.» Furthermore, a good man shall promote the interest of the collective instead of his own, that is «to be the first to work for the state and the last to enjoy oneself». In relations with people, it is important to be thankful. Tang Ju, an ancient minister, once so advised his Prince, «what others have done for us we shall never forget, while what we have done for others we have to forget.» Although urbanization and social mobility have weakened the bonds of families or clans, giving rise to civil society, virtues such as respect, solidarity and faithfulness are nevertheless fundamental values. People become more independent, individualistic, outspoken and critical, yet good intention towards others is always valued. Supporting one another in teamwork, helping those in need and sympathy to the disadvantaged, such are underlying values supporting a rapidly evolving and diversifying society.
In foreign relations, it turned out difficult for some Western observers to understand Chinese motives in its dealing with Africa and certain Asian neighbors. They do not understand how much it means being poor «brothers» to each other means to the Chinese mind, and that calculation of interests does not justify Chinese supports for promoting development. The principles of mutual respect, equality and non-interference that China enshrines, in the spirit of fraternity and solidarity, are often seen as contrary to the Western approach of pressure and conditionality. Those people are unable to appreciate how much it means to China when it restored its seat in the United Nations with the support of African brothers, and why China built 1860 kilometers of railway in Africa 34 years ago. Third, Zhong(忠)and Xin(信), or loyalty and credibility, are important values in a person’s social standing as well as in his relations to people.
By Zhong, Confucius refers to devotion to the wellbeing of others or the public good. As a higher level of social obligation than filialness to his family, a person is required to be faithful to others and his country. By Xin, Confucius means honesty, being truthful and keeping one’s word. Zeng Zi(曾子), one of Confucius’ disciples, often examined himself in three aspects: «Whether I had worked for others’ benefits; whether I had kept my promises; whether I had practiced what I have been taught.» A great example of this was the story of Prince Ji Zha(季札), more than 2000 years ago. When he was on a diplomatic trip to neighboring states, he noticed that his host, Prince of Xu(徐君), liked his sword very much but did not ask for it. Prince Ji Zha had silently promised to give him the sword, a national treasure, after completing the mission. He came back only to find Prince of Xu dead, but nonetheless he hung his sword on the tree of Xu’s tomb, to honor an untold promise.
The ancient wisdom also cautioned people regarding the importance of Xin, honesty and credibility. Confucius says to his students, «A gentleman is one who does not talk until he has done it, and who is quick in doing and cautious in talking.» He was very upset with one of his students sleeping at daytime, and said that from then on he would «not only listen to what people say, but watch closely what people do.» This applies quite well to examining the efforts of many industrialized countries in helping the poor deliver the Millennium Development Goal, the reluctance of the rich countries to shoulder responsibility for climate change, and talks of «spreading democracy and freedom» instead of working on the ground to promote peace and development. The sobering reality is that, absent peace, stability and development, imposing political freedom oftentimes led to chaos, civil war and poverty. People in the developing world need more urgently the freedom from war, freedom from want, freedom from hunger, freedom from lack of drinking water, medicine and electricity. That reminds me of the responsibility of an ancient Chinese person, that is to improve himself, take care of his family, contribute to the governance of his country, and promote He(和), peace and harmony, of the world under Heaven. And this sheds lights on contemporary China’s foreign policy goal: to join efforts with all nations and build towards a harmonious world of lasting peace and common prosperity.
Dear Professor, Young Friends,
Rather than a rising power bent on pursuing self-interests, evading responsibility and showing assertiveness as occasionally portrayed, China as a developing economy is working hard to achieve people-centered, sustainable, innovative, environment- friendly and energy-conserving development. We are working hard to address various problems and challenges unique to a huge developing country, and improve the living standards of 1.3 billion. We are working hard to improve democracy and rule of law, build up a social security system, provide better social services, in order to ensure that every Chinese man and woman, boy and girl, will be able to live in happiness and with dignity.
Guided by traditional values and driven by the fast changing reality, China is increasingly integrated into globalization and has become a responsible stakeholder, a contributing force, and a reliable partner to the international system. We benefit from being a part of it, and contribute to its wellbeing. We have been working diligently to promote regional cooperation in the frameworks of APEC, ASEAN+1, ASEAN+3 and Shanghai Cooperation Organization. We have been working hard for peace and stability in our region, mediating talks on Korean Peninsula, urging reconciliation in the neighborhood. We have been keeping peace under many United Nations missions, patrolling waters in Gulf of Aden, escorting Chinese, Greek and international merchant vessels. China has done its part in helping other developing partners as well as reducing its own poverty. We contributed to world economic recovery, not only by a fast growing GDP, but also through increasing domestic demand and import. We played a humble and helpful role in supporting the European efforts to overcome the debt problems, including commitment to buying Greek bonds and financing Greek shipowners’ new buildings in China. At the China-EU summit in October, the years 2011 and 2012 have been designated as the Year of Youth Exchange and the Year of Intercultural Dialogue between China and the European Union. Last but not the least, all of you are most welcome to visit my country and contact my embassy. I wish you well and thank you for your attention.